Order in the matter of Vijaya Bank

WTM/PS/77/CFD-DCR-1/FEB/2014 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER In the matter of proposed acquisition of equity shares of Vijaya Bank - Application filed under regulation 11(1) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011

1. Vijaya Bank (hereinafter referred to as "the Target Company" or "the Bank") is a public sector bank, having its Head Office at 41/2, M. G. Road, Bangalore - 560 001. The shares of the Bank are listed on the Bombay Stock Exchange Limited ("BSE"), the National Stock Exchange of India Limited ("NSE") and the Bangalore Stock Exchange Limited ("BgSE").

2. The Target Company filed an application dated January 20, 2014 with the Securities and Exchange Board of India (hereinafter referred to as "the SEBI"), on behalf of its promoter, the Government of India (hereinafter referred to as "the GoI"), under regulation 11(1) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to as "the Takeover Regulations"), seeking exemption for the GoI from the applicability of regulation 3(2) of the Takeover Regulations in respect of its proposed acquisition of 30,46,45,849 shares through conversion of 1200 crore Perpetual Non-Cumulative Preference Shares ("PNCPS") [120 crore PNCPS of 10/- each]. The application inter alia stated the following :

a) The authorised capital of the Bank is 3,000 crore and the paid-up capital as on March 31, 2013 was 1695.54 crore consisting of equity share capital of 495.54 crore and preference share capital of 1200 crore. Further, the Bank has issued and allotted 5,89,34,464 equity shares of 10/- each at a premium of 32.42/- per share on preferential basis to the GoI during December 2013. b) Presently, the paid up capital of the Bank is 1754.47 crore consisting of equity share capital of 554.47 crore and preference share capital of 1200 crore. The preference shares of 1200 crore are held by the GoI. c) The GoI is holding 33,16,01,200 shares i.e. 59.80% of the equity share capital of the Bank.

d) The Bank vide letter dated May 24, 2013, inter alia requested the GoI for conversion of PNCPS of 1200 crore into equity shares to improve Common Equity Tier - I of the Bank to meet the requirement under Basel-III and also to increase the holding of GOI to approximately 68% from the present level of 55.04%. The same, according, to the Bank, was made considering that the conversion of PNCPS and consequent increase in the holding of GoI shall give the Bank headroom for further disinvestment at the appropriate time. e) Considering such request of the Bank, the GOI through the Ministry of Finance, vide letter dated January 06, 2014 has advised their decision to convert the existing PNCPS held by GoI to the tune of 1200 crore into equity shares of the Bank, in favour of GoI. f) Pursuant to the same, the Board of Directors of the Bank, in their meeting held on January 17, 2014, approved conversion of the existing PNCPS to the tune of 1200 crore into Equity Shares of the Bank subject to the approval of the Reserve Bank of India ("RBI"), the shareholders and other statutory authorities. An Extra-Ordinary General Meeting ("EGM") of the shareholders is scheduled to be convened on February 19, 2014 to pass the necessary resolution for the proposed conversion of PNCPS into equity shares. g) The GoI in its afore-mentioned letter has advised that the entire process be completed in the financial year 2013-2014. h) The 'Relevant Date' is January 20, 2014 for ascertaining the issue price to arrive at the quantity of shares to be issued pursuant to conversion of PNCPS.

The issue price has been fixed at 39.39/- per equity share, which is calculated as per regulation 76(1) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 ("the ICDR Regulations"). Based on the issue price and the quantum of PNCPS due for conversion, the total number of shares that would be offered to GoI is 30,46,45,849 equity shares. Accordingly, post the conversion, the GoI would be holding 63,62,47,049 equity shares (i.e. 74.06%). i) The proposed conversion of PNCPS into equity shares would not have any change in the control in the management of the Bank. j) As the proposed conversion of PNCPS into equity shares would increase the shareholding of GoI by 14.26% (which is more than 5% in a financial year) during the financial year 2013-2014, exemption is sought from the applicability of regulation 3(2) of the Takeover Regulations.

3. I have considered the application made by the Bank on behalf of the GoI, the documents enclosed thereto and other material available on record. The GoI (a shareholder of the Target Company under the category 'Promoter and Promoter Group'), which is the proposed acquirer, presently holds 33,16,01,200 shares in the Bank, which constitutes 59.80% of the total number (55,44,73,458 shares) of equity shares of the Bank.

4. I note from the letter dated January 06, 2014 (letter from the Ministry of Finance, GoI to the Target Company) that the GoI has conveyed its approval for conversion of PNCPS held by it in the Bank to the tune of 1200 crores into equity share in favour of GoI, subject to the approval of shareholders, SEBI and other authorities. The Board of Directors of the Bank, in their meeting held on January 17, 2014, have approved the proposed conversion of the existing PNCPS to the tune of 1200 crore into Equity Shares of the Bank subject to the approval of the RBI, the shareholders and other statutory authorities. An Extra-Ordinary General Meeting ("EGM") of the shareholders has been convened on February 19, 2014 to pass the necessary resolution for the proposed conversion of PNCPS into equity shares.

5. I note that the Bank has submitted that the issue price has been fixed at 39.39/- per equity share of 10/- each as per regulation 76(1) of the ICDR Regulations, taking into consideration "January 20, 2014" as the Relevant Date. Accordingly, the Target Company has proposed to allot 30,46,45,849 equity shares to the GoI pursuant to the conversion of PNCPS. The proposed allotment of 30,46,45,849 equity shares of the Target Company to the GoI would increase the shareholding of the GoI (in the Target Company) from 59.80% to 74.06%. This resultant increase in the shareholding/voting rights of the GoI would be around 14.26%, which increase mandates an open offer under the provisions of regulation 3(2) of the Takeover Regulations, unless the same is exempted under regulation 11 of the Takeover Regulations. Accordingly, the Target Company on behalf of GoI, has sought exemption from the applicability of the said regulation.

6. The shareholding pattern in the Target Company as mentioned in the application and the shareholding pattern post the proposed preferential allotment to the GoI, is given in the following table :

Shareholding pattern in the Target Company Category Pre-conversion Post issue of equity on conversion of PNCPS No. of shares Percentage No. of shares Percentage Promoter Group 33,16,01,200 59.80% 63,62,47,049 74.06% (GoI) FIs/banks 6,80,73,116 12.27% 6,80,73,116 7.92% FIIs/NRIs/OCB 1,72,87,776 3.13% 1,72,87,776 2.01% Public 13,75,11,366 24.80% 13,75,11,366 16.01% Total 55,44,73,458 100% 85,91,19,307 100%

7. I note that the conversion of PNCPS in favour of GoI would enable the Target Company to achieve the Tier I CRAR in accordance with the Basel III guidelines. I also note that even after the proposed increase in the shareholding of GoI in the Target Company pursuant to the proposed conversion of PNCPS, the minimum public shareholding as stipulated in rule 19A(3) of the Securities Contracts (Regulation) Rules, 1957, would be maintained. Further, there would not be any change in the management control in the Target Company pursuant to the proposed transaction.

8. Considering the proposed conversion of PNCPS into equity shares in favour of GoI in the light of the reasons stated by the Target Company and the observations made above, I am of the considered view that this is a fit case to grant exemption under regulation 11 of the Takeover Regulations to the GoI from the obligation to make an open offer under regulation 3(2) of the Takeover Regulations with respect to its proposed increase of shares/voting rights from 59.80% to 74.06%, pursuant to conversion of PNCPS into 30,46,45,849 equity shares to the GoI.

9. In view of the foregoing, I, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with regulation 11(5) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, hereby grant exemption to the proposed acquirer, the Government of India, from complying with the requirements of regulation 3(2) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 with respect to its proposed acquisition of 30,46,45,849 shares by way of conversion of PNCPS (of 1200 crore) by the Target Company i.e., Vijaya Bank, which may increase the shareholding/voting rights of the Government of India in the Target Company from 59.80% to 74.06%. The exemption is granted subject to the following conditions :

(i) The proposed acquisition shall be in accordance with the relevant provisions of the Companies Act, 1956, the Companies Act, 2013, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, the Listing Agreement and all other applicable laws. (ii) The GoI/Target Company shall ensure compliance with the statements, disclosures and undertakings made in the application/other correspondence.

(iii) The exemption is only limited to the requirements of making open offer under regulation 3(2) of the Takeover Regulations, 2011 and shall not extend to other obligations (e.g. disclosure requirements under Chapter V of the said Takeover Regulations, Listing Agreement or any other law) of the GoI/Target Company.

10. The application dated January 21, 2014 filed by the Government of India through the Vijaya Bank, is accordingly disposed off.

PRASHANT SARAN WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Date : February 17, 2014 Place : Mumbai